Five basic market structures in mikroeconomics
In microeconomics there are five basic market structures. We can distinguish: perfect competition, monopolistic competition, perfect monopoly, natural monopoly and oligopoly. Each of them varies in many aspects and I am going to present the definitions and differences between them.
First type of the market is perfect competition which is possible only in theory. The definition assumes that all goods are identical, all market participants have perfect information, there are no barriers to enter or exit the market and at any given moment the market is in temporary equilibrium between demand and supply. In this type of market a seller can make profit in a short time without any advertisements.
Unlike perfect competition, monopolistic competition is the state of the market where there is a big differentiation of goods, technologies and consumers needs so the competitor can achieve nearly monopolistic profit. In this type of market companies have to use advertisements in order to attract clients attention. The market is open to almost anybody as there are no barriers to enter it. Just as in perfect competition, monopolistic competition characterizes by the ability to make high profits in a fairly short period of time. One of the most important features of monopoly is that the company can set the prizes of products as there are no competitors who could cut them down.
The next market structure is perfect monopoly. This is a state where there are many customers and only one supplier. A company that has total control of a given market. Most of the time, a perfect monopoly exists in a situation in which a company has a patent or uses some technology that is popular with consumers, but is protected from use by another company, at least for limited period of time. In this situation as in any other monopolies, the company can set ridiculously high prices and this will not influence their sales.
A natural monopoly by contrast is a condition on the cost-technology of an
First type of the market is perfect competition which is possible only in theory. The definition assumes that all goods are identical, all market participants have perfect information, there are no barriers to enter or exit the market and at any given moment the market is in temporary equilibrium between demand and supply. In this type of market a seller can make profit in a short time without any advertisements.
Unlike perfect competition, monopolistic competition is the state of the market where there is a big differentiation of goods, technologies and consumers needs so the competitor can achieve nearly monopolistic profit. In this type of market companies have to use advertisements in order to attract clients attention. The market is open to almost anybody as there are no barriers to enter it. Just as in perfect competition, monopolistic competition characterizes by the ability to make high profits in a fairly short period of time. One of the most important features of monopoly is that the company can set the prizes of products as there are no competitors who could cut them down.
The next market structure is perfect monopoly. This is a state where there are many customers and only one supplier. A company that has total control of a given market. Most of the time, a perfect monopoly exists in a situation in which a company has a patent or uses some technology that is popular with consumers, but is protected from use by another company, at least for limited period of time. In this situation as in any other monopolies, the company can set ridiculously high prices and this will not influence their sales.
A natural monopoly by contrast is a condition on the cost-technology of an